I work for Telerik:
You cannot currently update a Sitefinity 3.x web site to Sitefinity 4.0. Sitefinity 4.0 is not yet released. It currently only exists as a CTP release. During the first week in August 2010, there will be a BETA release of Sitefinity 4.0, but it is not intended for production web sites.
Telerik will not create a migration path for these early pre-release versions of Sitefinity 4.0. There are no tools available to migrate your Sitefinity 3.x web site to an early CTP or BETA build of Sitefinity 4.0. Furthermore, Telerik will not create tools to allow you to migrate content from these early builds to the official build of Sitefinity 4.0
The RC release of Sitefinity 4.0 is tentatively planned for October 2010. This will be the first 4.0 release where a migration path is available. Early adopters can begin to test migration of their existing web sites using this RC release. In October I would be glad to discuss pros and cons.
Until then, the con of updating to 4.0 is that you've reached a dead-end. The CTP and BETA releases of Sitefinity 4.0 are intended only for experimentation. Telerik is using these releases to gather early feedback.